ArcelorMittal posts 3rd consecutive quarterly loss

BRUSSELS 
The world's largest steel maker, ArcelorMittal SA, on Wednesday reported a loss of $792 million for the second quarter, its third consecutive quarterly loss, but said demand was recovering and that it would increase production.

CEO Lakshmi Mittal said the company would restart production at some plants to meet "some initial signs" that the steel slump is ending. He warned that full recovery would be slow and progressive.

ArcelorMittal blamed the net loss on $1.2 billion in charges from writing down steel stocks and paying severance to workers who took up the company's voluntary redundancy program. The company made a profit of $5.8 billion last year.

Revenues more than halved for the three months ending June 30 to $15.2 billion, down from $37.8 billion a year ago.

The third quarter should be better, the company said, as customers start restocking, prices rise and costs for key raw materials – iron ore and coal – fall from record highs.

"The recovery has begun," said chief financial officer Aditya Mittal. "We're seeing some increase in our order volume so fundamentally we believe destocking has come to an end globally."

Mittal warned that it was hard to see any real growth in the United States and Europe, where customers are merely replacing supplies that they ran down in the last few quarters. Real demand has come back in Brazil, where shipments rose by 25 percent from the first quarter, and in China, where consumption is rising by about 10 percent from a year ago, he said.

The company sees global demand for 2009 falling by 10 percent compared to 2008 – less than a 15 percent drop forecast by the World Steel Association – due to higher demand from China, now a net importer of steel.

Mittal would not comment directly on reports that it was considering offloading its eastern European stainless steel business to a joint venture with South Korea's Posco. He said the company did not want to sell assets entirely but would consider joint ventures.

ArcelorMittal said the global recession had triggered an "extreme weakness" in steel demand along with a steep fall in prices.

Its main customers – car makers, construction and engineering companies – have slashed output on falling demand from customers facing the sharpest downturn since the Second World War.

The company plunged into loss for the first time in the last three months of 2008 as the steel industry slipped rapidly from boom to bust.

ArcelorMittal shuttered plants this winter and spring, almost halving output as steel stocks remained high, laying off thousands of workers temporarily. Fearing that these closures could become permanent, Belgian and French workers attacked the company's headquarters during a shareholder meeting in May.

Aditya Mittal said the company had no plans to make permanent cutbacks to capacity. The company is restarting blast furnaces in Europe – including at Florange in France and Ghent in Belgium – and at Indiana in the U.S. More could be opened in the near future, he said.

The company has offered voluntary redundancy to 9,000 workers and said this would continue but would not give any figure.

ArcelorMittal said it doesn't plan to go much further in aggressively reducing a high debt burden that it built up during a rapid expansion program to meet surging demand in recent years. It paid off $3.8 billion in net debt in the second quarter and had total debt of $22.9 billion on June 30, it said.

It said its bankers had agreed to let it change a leverage ratio to give more flexibility if the economy worsens.

The company also reported cost savings of $1.7 billion in the quarter, close to its target of $2 billion for the year.